Executive Summary

Welcome to the September 2017 issue of the Latest News in Financial Advisor #FinTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors and wealth management!

This month’s edition kicks off with the big news that Personal Capital has crossed $5B of AUM, and raised another $40M of venture capital as it looks to expand by hiring more financial advisors in multiple major cities across the US, as the revenue growth of “cyborg” (tech-augmented human) advisors continues to outpace pure robo-advisors, and Personal Capital’s revenue continues to stay ahead of all other major robo-advisors combined, thanks in large part to its innovative Personal Financial Management (PFM) app that serves as the company’s client acquisition funnel (even as banks continue to struggle to monetize PFM software solutions at all!).

And also in the big news this month is the announcement that Canadian financial planning software company PlanPlus has acquired risk tolerance assessment provider FinaMetrica, raising the question of whether PlanPlus is about to make a push into the US financial planning software market to compete against the likes of eMoney Advisor, MoneyGuidePro, and NaviPlan.

From there, the latest highlights also include a number of major new partnership announcements this month, including:

JemStep picks up two major enterprise deals, with the Advisor Group broker-dealers, and KeyBank’s Investment Services division, as its efforts to integrate with the Pershing platform is finally beginning to pay dividends with its Invesco parent backing;

Apex Clearing announces yet another partnership, this time with tech-savvy TAMP provider FolioDynamix, setting up a new RIA custodian pricing war in 2018;

Advicent’s NaviPlan rolls out a new integration with Envestnet, and expands the APIs in its Narrator platform; and

Envestnet’s Tamarac announces a new in-depth integration available in the Salesforce App Exchange, despite the fact that Tamarac’s own Advisor CRM is built on Dynamics!

You can view analysis of these announcements and more trends in advisor technology in this month’s column, including Vestwell being selected as the winner of the recent XY Planning Network FinTech competition, WealthAccess rolling out a new Business Intelligence dashboard to roll up advisor/client PFM data into a consolidated business reporting tool, TD Ameritrade rolls out a Facebook Messenger Chatbot as a sign of the future of client service and communication, and the emergence of a new category of “client financial profiling” tools, including ROL Advisor, DataPoints, and Whealthcare, that aim to deepen the client relationship far beyond what a mere risk tolerance profile alone can reveal about a client’s attitudes about money.

I hope you’re continuing to find this new column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit toTechNews@kitces.com!

PlanPlus Acquires FinaMetrica Risk Tolerance Software. Effective August 1st, Canadian financial planning software maker PlanPlus has acquired risk tolerance software FinaMetrica, and will be merged into a single entity called PlanPlus Global. Notably, the acquisition is not expected to materially change the distribution and availability of FinaMetrica, and appears to have been driven by the need for a liquidity event for the founders, as FinaMetrica was established nearly 20 years ago, and co-founder Geoff Davey had already retired from his executive role with the company two years ago. In fact, PlanPlus was arguably particularly well suited for the acquisition, given that FinaMetrica has a substantial user base not only here in the US, but also with advisors in Australia (where the company originated), the UK, and Canada, while PlanPlus similarly provides financial planning software in most of those countries (though it is not widely used here in the US). In those countries, the FinaMetrica acquisition gives PlanPlus the opportunity to both more deeply integrate FinaMetrica into its financial planning software and recent “robo” tool MiPlan, and also a chance to offer FinaMetrica to its existing financial planning software users. The real question, though, is how the PlanPlus acquisition plays out in the US. While there is a risk that with PlanPlus having little presence in the US, it will focus its newly acquired FinaMetrica resources in other countries where it has more existing traction, the sheer size of the existing FinaMetrica advisor base here in the US suggests it is more likely that PlanPlus uses the deal as an opportunity for growth by attempting to cross-sell PlanPlus to existing FinaMetrica users. Especially since PlanPlus CEO Shawn Brayman is a member of the US Financial Planning Association’s Board of Directors, suggesting that PlanPlus is aiming to grow with US advisors. At a minimum, though, the deeper technology and development resources of PlanPlus should help FinaMetrica to continue upgrading its software capabilities and depth of integrations in the coming years.

Vestwell Wins XYPN FinTech Competition. Last week, the XY Planning Network hosted its second annual Advisor FinTech competition at its national conference, and out of the 7 finalists, the winner was Vestwell, the new 401(k) and 403(b) “robo” technology platform for advisors. Notably, though, unlike other “robo” 401(k) solutions like Betterment for Business, the Vestwell solution was built from the start to be used by advisors. Co-founded last year by Aaron Schumm – who previously built and sold the tech-savvy TAMP FolioDynamix for nearly $200M – Vestwell is aiming to provide a similar turnkey solution in the 401(k) space, by overlaying on top of recordkeepers and investment managers to make it easier (for both advisors and companies and their employees) to handle plan design, onboard plans and plan participants, and Vestwell can even serve as a 3(21) or 3(38) fiduciary (or provide full 3(16) plan administrator services). The company is aiming to work primarily with RIAs serving the “small” employer retirement plan space (with plans less than $50M of AUM)… including RIAs that previously found it too onerous to support their clients’ 401(k) plans, but may be willing to add in 401(k) services with Vestwell’s 401(k) TAMP solution!

WealthAccess Rolls Out “Firm Insight” Business Intelligence Dashboards. WealthAccess is an independent Personal Financial Management (PFM) client portal solution for advisors to use with their clients, which takes account aggregation feeds to show clients a holistic view of their entire balance sheet and household cash flows. Of course, the reality is that if an advisor uses the WealthAccess portal for all their clients, there’s value not only in showing clients their entire financial situation, but also for the advisor to gain insights into the rolled-up details of their entire clientele. Accordingly, WealthAccess has now rolled out the first version of its Business Intelligence dashboard, dubbed “Firm Insight”, which can help advisors see the total depth of their clients’ wealth, as well as identifying new business opportunities. At the firm level, executives can also gain a better understanding of the wealth potential of one advisor’s client base versus another’s, whether to make decisions about resource support decisions, or to spot training opportunities for advisors to deepen the relationship with certain clients. In fact, the business potential of better oversight of advisors and their client opportunities (powered by account aggregation data feeds) is so significant, that it’s likely more and more account aggregation and client PFM portal solutions will offer similar solutions in the coming years, as such dashboards become a key business management tool for larger multi-advisor enterprises.

Apex Clearing Announces New Partnership Deal With FolioDynamix. Continuing a multi-month series of major deals, in August Apex Clearing announced a new partnership deal with tech-savvy TAMP provider FolioDynamix. As with other recent Apex partnerships, including InvestCloud in July, Trizic in June, RobustWealth in May, and Vanare | Nest Egg (now AdvisorEngine) last year, the deal is one that will allow FolioDynamix’s technology tools to be used on top of the ultra-low-cost Apex Clearing platform, as Apex continues to bet that in an increasingly commoditized custody and clearing business, its lowest-cost solution (rumored to have asset-based pricing as low as 6bps!) will win out once investment technology companies make them available as a platform. After all, if an advisor is already using various tools like AdvisorEngine, InvestCloud, Trizic, RobustWealth, or now FolioDynamix, and those solutions are already multi-custodial, it becomes little more than “the click of a button” for the advisor to switch to the lower cost Apex platform (with the caveat that clients still have to agree to the change, of course!). Of course, it still remains to be seen whether advisors will actually be willing to make the switch when the time comes. But the mere fact that Apex is increasingly available through a growing range of technology intermediaries means a new round of pricing competition is likely coming soon to Schwab, Fidelity, and TD Ameritrade, as advisors increasingly start to ask “why wouldn’t we switch our clients to Apex, using our existing technology… unless you cut your custody and trading fees to match Apex’s pricing…” Expect new RIA custody pricing wars in 2018!

Advicent Expands APIs As NaviPlan Catches Up On Integrations. Despite, or perhaps because of, its long-standing history as one of the “original” financial planning software solutions, NaviPlan was one of the last financial planning software solutions to migrate to the cloud, only finally winding down its desktop version at the end of 2013, and long rumored to struggle with a large separate of discrete enterprise deployments throughout the 2000s that made it difficult to innovate its core code base. In recent years, though, the software has been steadily rearchitected, with an advisor and client portal dubbed “Narrator”, which companies can use as a sandbox to leverage NaviPlan (and other Advicent) APIs for customization and integrations. And after several years of building, Advicent now appears to be gaining some momentum to its integration strategies, with the announcement a major deal to integrate with Envestnet to pass Envestnet client and account details to NaviPlan (which is significant, as Envestnet already deeply integrates with its own FinanceLogix software since acquiring it 2 years ago). In addition, Advicent also announced this month that it is further expanding its API capabilities in Narrator, for everything from wealth management to lead generation and digital data gathering, and is rolling out a new API developer portal to support further API integrations. Which still leaves NaviPlan and Advicent behind the depth of native integrations that FinanceLogix has with Envestnet, or that eMoney Advisor has built over the years (and scaled up with Fidelity’s ownership support), but with far more portal API capabilities than MoneyGuidePro, which insists on maintaining its planning-software-only focus (without developing a full PFM portal for its advisors and clients).

Tamarac Launches Salesforce App Exchange Integration Despite Native Dynamics CRM. This month, Tamarac announced that its portfolio reporting and rebalancing software has fully integrated with Salesforce, and will be available via the Salesforce App Exchange. The bi-directional integration will both populate key Tamarac portfolio data directly into Salesforce, and pull Salesforce client details into Tamarac (e.g., when client name and address information is updated in Salesforce, it will automatically update in Tamarac). Given that Salesforce is now the 3rd most popular advisor CRM according to the recent T3 2017 Advisor Tech Survey, and a leader amongst the largest independent advisory firms (who tend to be Tamarac users), the decision of Tamarac to integrate is not entirely surprising. Notably, though, Tamarac itself has its own native CRM solution, built from the start on top of Microsoft Dynamics. Which means Tamarac’s decision to integrate to Salesforce suggests that it is struggling to switch advisory firms to Dynamics – which isn’t entirely surprising, as the growth of Salesforce (and middleware providers building on top of it in the Salesforce App Exchange) has left Dynamics in the dust when it comes to the Financial Services industry. On the plus side for Tamarac, a deep integration to Salesforce and a move away from its native Dynamics CRM solution should open up a wide range of new advisory firms. But it also raises questions of whether this may be the beginning of the end of Tamarac’s own Dynamics CRM, especially if Tamarac-Salesforce users begin to outpace the growth and adoption of Tamarac’s own CRM in the coming years?

TD Ameritrade Launches Facebook Chatbot As Client Service Moves To Third-Party Platforms. TD Ameritrade recently announced that it is launching a Facebook chatbot – a technology tool that will allow TDA clients to ask, via Facebook Messenger, about their account balances and trade status, and receive instant updates directly via the Messenger platform. On the one hand, the announcement is simply an acknowledgement that good client service is increasingly about going beyond “just” asking a client to use your website or app (or place a phone call to customer service), and instead is about working with clients where they are – which includes the world’s largest social media platform, and perhaps soon voice-activated systems like Amazon’s Alexa as well. On the other hand, though, the news represents the first step of what may become a fundamental shift in the expectations of where and how advisors must interact with their clients in the future. Of course, as is common with “cutting edge” technology, thus far the early reports of Facebook Messenger chatbots are lackluster – with delays of up to 15 minutes for responses, and “answers” that are often little more than reporting back basic information or responses from a simple list of Q&A answers. And companies like TDA are still working through the messy but crucial steps to authenticate who is a valid Facebook-based TDA user in the first place, to avoid breaching private client information. Nonetheless, the point remains that the basis for interacting with clients is increasingly shifting to digital mediums beyond just the advisor’s office, client emails, and telephone calls… and that in the future, advisors (and financial services firms in general) must be prepared to interact with clients through a wider range of communication channels.

The Rise Of Financial Profiling Tools For Advisors. Financial advisors have long used various forms of risk tolerance profiling tools with clients, as a means of addressing basic “Know Your Client” (KYC) requirements regarding their investment implications, though since the arrival of Riskalyze a few years ago, online risk assessment profiling tools as a means of engaging prospects (rather than just doing due diligence on an already-agreed-to-come-on-board new client) has gained rapid adoption. Yet as investment management becomes increasingly commoditized, and the pressure grows to do more comprehensive financial planning beyond just the portfolio, so too are “client profiling tools” being pressured to go beyond “just” risk tolerance assessments and into a more holistic view of the client’s financial attitudes. Accordingly, a new category of “financial profiling tools” is beginning to emerge. Arguably, it started with solutions like Financial DNA years ago, which aimed to assess not just a client’s tolerance for risk, but their broader financial attitudes. And companies like Money Quotient have long produced (paper) questionnaires that advisors can use to better profile their clients. But more recently, there was the Precise FP/Bob Veres joint venture “Financial Identities”, and the recent XY Planning Network FinTech competition featured new financial profiling technology solutions as 2 of its 7 finalists, including ROL Advisor (a series of online client profiling tools to support life planning for clients from life planning pioneer Mitch Anthony and Peak Advisor managing partner Steve Sanduski), and DataPoints (which offers psychometrically designed assessment tools to help evaluate a prospective client’s wealth-building potential that originated from the Millionaire Next Door research). At a minimum, the evolution of such tools has the potential to shorten the data gathering and discovery process for comprehensive financial planners, as much of what is typically discussed in the first meeting instead shifts to pre-engagement online tools. But ultimately, the evolution of financial profiling tools like ROL Advisor and DataPoints can both help many financial advisors go deeper with clients (especially if they’re not accustomed to or trained in having such conversations upfront), and help in systematizing what is otherwise a very one-client-at-a-time process for even the most comprehensive of financial planners.

New Product Watch: Whealthcare. Continuing the theme of new profiling and assessment tools for advisors to use with their clients that go beyond “just” risk tolerance, the new software to watch this month is the release of Whealthcare, which is the neologism implies, focuses on the intersection of wealth and healthcare. Created by physician-turned-financial-planner Dr. Carolyn McClanahan, Whealthcare provides advisors a series of three tools to use with their (aging and retired) clients to evaluate health-care-related issues: the first is a Financial Caretaking assessment, which aims to understand whether clients have the proper plans (and legal documents) in place for continuity of financial caretaking if they are incapacitated or impacted by cognitive impairment; the second is a Risk Profile, which is designed not to assess the client’s risk tolerance, but their risk of cognitive impairment (and whether they might already be impaired by the early stages of dementia or Alzheimer’s); and the third is a tool to help formulate a Long Term Care plan, where the focus is not how to pay for long-term care needs (e.g., with traditional or a hybrid LTC policy), but what the actual long-term care plan would be (i.e., in what facilities would the client stay, and what would it cost, based on their individual health, and tendencies to utilize doctors and the health care system)? At the least, Whealthcare may help with the growing focus of financial regulators on using financial advisors to identify potential situations of client cognitive impairment or senior fraud or exploitation (e.g., as both FINRA and states are working on proposals where advisors can intervene in such situations). But ultimately, as the pressure continues to grow on financial advisors to demonstrate their value proposition beyond just the portfolio alone, Whealthcare provides a framework of tools that advisors can use to take their relationship with retired clients to a much deeper level when it comes to health care, long-term care, and managing cognitive decline (as McClanahan does in her own advisory practice).

So what do you think? Will Vestwell really be able to make a dent in the challenging small-business employer retirement plan marketplace? Is Apex going to manage to apply competitive pricing pressure against Schwab, Fidelity, and TD Ameritrade? Are PFM software makers missing the mark by not building and marketing solutions to advisors? Will client financial profiling tools that go beyond just risk tolerance really gain traction with advisors? Please share your thoughts in the comments below!

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.